TTK Protective Devices Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2046/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8024 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 21-01-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 07-10-2015
• Court: TRIBUNAL
• Department Lawyers: R DURAI
• Keywords: Reopening of assessment; Depreciation; Earning of tax free income; Reasonable cause; Tangible material; Difference of opinion; Condonation of delay; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 14A; 80IB; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! . ! ' # $ #% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.2046 /MDS./2015 ( $ & !'& / ASSESSMENT YEAR :2004-05) M/S.TTK PROTECTIVE DEVICES LTD., (FORMERLY TTK LIG LTD.) 6,CATHEDRAL ROAD, CHENNAI 600 086. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -3(1), CHENNAI 600 034. PAN AABCT 1184 G ( / APPELLANT ) ( / RESPONDENT ) () * + / APPELLANT BY : MR.SAROJKUMAR PARIDA,ADVOCATE ,-() * + / RESPONDENT BY : MR.R.DURAIPANDIAN,JCIT, D.R ' ! * . / DATE OF HEARING : 21.01.2016 /0' * . /DATE OF PRONOUNCEMENT : 10 .02.2016 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)- 11, CHENNAI DATED 26.02.2015 PERTAINING TO THE ASSESSMENT YEAR 2004-05. ITA NO.2046/MDS/2015 2 2. THERE IS A DELAY OF 124 DAYS FOR FILING THE APPE AL. THE ASSESSEE FILED A PETITION FOR CONDONATION OF DELAY STATING T HAT THE ORDER OF CIT(A) WAS RECEIVED BY THE ASSESSEE ON 06.04.2015 A ND APPEAL SHOULD HAVE BEEN FILED ON OR BEFORE 06.06.2015. HO WEVER, IT WAS ACTUALLY FILED ON 07.10.2015, THEREBY THERE WAS A D ELAY OF 124 DAYS. IT WAS FURTHER SUBMITTED THAT THE FILING WORK WAS E NTRUSTED TO MR.N.GOPALAN, WHO HAD LEFT THE SERVICES VIDE HIS RE SIGNATION LETTER DATED 29.04.2015 AND THEREAFTER IN HIS ABSENCE, THE RE WAS NO COMPETENT PERSON TO CARE OF THE TAXATION MATTER. B EING SO, IT HAS TAKEN TIME TO IDENTIFY THE COUNSEL FOR FILING THE APPEAL AND LATER THIS CASE WAS GIVEN TO M/S.SUBBARAYA AIYAR PADMANABHAN A ND RAMAMANI, ADVOCATES AND THUS THERE WAS A DELAY OF 1 24 DAYS IN FILING THE APPEAL BEFORE THIS TRIBUNAL AND DELAY H AS TO BE CONDONED. 3. WE HAVE CAREFULLY GONE THROUGH THE REASONS ADVA NCED BY THE ASSESSEE, THE PETITION AS WELL AS AFFIDAVIT FILED B Y THE ASSESSEE. IN OUR OPINION, THERE EXISTS REASONABLE CAUSE FOR FILI NG THE APPEAL BELATEDLY BEFORE THIS TRIBUNAL. AS THE REASON ADVA NCED BY THE ITA NO.2046/MDS/2015 3 ASSESSEE IS BONAFIDE, THE DELAY IN FILING THE APPEA L IS CONDONED AND THE APPEAL IS ADMITTED FOR ADJUDICATION. 4. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD TO CONFIRM THE REOPENING OF ASSESSMENT U/S.147 OF THE ACT. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF RUBBER CONTRACEPTIVES AND FILED ITS RETURN OF INCOME ON 29 .10.2004 ADMITTING A TOTAL INCOME OF RS.40,75,83,117/-. SUBSEQUENTLY, THE RETURN WAS SELECTED FOR SCRUTINY UNDER CASS AND THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 21.12.2006. THE REAFTER, THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE U/S.148 DATED 30.03.2011 ON THE GROUND THE DISALLOWANCE OF EXPEN DITURE U/S.14A OF THE ACT IN RELATION TO INVESTMENTS IN MUTUAL FUNDS HAS BEEN OMITTED TO BE MADE IN THE SCRUTINY. IN RESPONSE, THE ASSESSEE FILED A LETTER WHEREIN THE ASSESSEE OBJECTED FOR THE PROPOSED RE-O PENING OF ASSESSMENT. FINALLY, THE LD. ASSESSING OFFICER COMP LETED THE ASSESSMENT U/S.143(3) R.W.S.147 ON 01.12.2011. ON APPEAL, THE LD. CIT(A) REJECTED THE ASSESSEES CONTENTION WITH REGA RD TO THE RE- ITA NO.2046/MDS/2015 4 OPENING OF ASSESSMENT. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 6. BEFORE US, THE LD.A.R SUBMITTED THAT THE ORIGIN AL ASSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED ON 21.12.2006 A ND THE ASSESSMENT WAS REOPENED VIDE NOTICE U/S.148 OF THE ACT DATED 30.03.2011, WHICH IS AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR (A.Y 2004-05) WITHOUT ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACT FULLY AND TRULY FOR THE PURPOSE OF ASSESSMENT. ACCORDING TO HIM, THE ASSESSMENT IS BAD IN LAW. FU RTHER, HE SUBMITTED THAT THE ASSESSMENT WAS REOPENED TO DISAL LOW THE EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME W HICH DOES NOT FORM PART OF THE TOTAL INCOME AS PER PROVISIONS OF THE SECTION 14A(1) OF THE ACT. HOWEVER, AO CONSIDERED THE OTHER ISSUE ALSO WHILE FRAMING THE RE-ASSESSMENT ORDER. FOR THIS PURPOSE, HE RELIED ON THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF CIT V S. JET AIRWAYS (I) LTD., REPORTED IN 331 ITR 236. ON THE OTHER HA ND, LD.D.R RELIED ON THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSMENT YEAR INVOLVES IN THIS CASE IS 2004-05. THE ITA NO.2046/MDS/2015 5 ORIGINAL ASSESSMENT WAS COMPLETED IN THIS CASE ON 2 1.12.2006 AND RE-OPENING OF ASSESSMENT NOTICE WAS ISSUED TO THE A SSESSEE U/S.148 OF THE ACT ON 30.03.2011 WITH THE REASONS THAT IN THE CASE OF THE ASSESSEE M/S. TTK LIG LIMITED, DURING THE LAST YEAR 2004-05, THE INVESTMENTS AS ON 31.03.2004 STANDS AT ` 51,46,64,200/- BEING INVESTMENTS IN MUTUAL FUNDS AND SUBSIDIARIES AND JO INT VENTURE PARTNER, THE INCOME FROM WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME. THE ASSESSEE COMPANY M/S. TTK LIG LIMITED WHILE COM PUTING INCOME CHARGEABLE TO TAX HAS NOT DISALLOWED THE EXP ENDITURE INCURRED IN RELATION TO THE ABOVE, THE INCOME FROM WHICH DOE S NOT FORM PART OF THE TOTAL INCOME AS PER SECTION 14A (1) OF THE INCO ME-TAX ACT, 1961. HENCE, THE SAME NEEDS TO BE DISALLOWED. RELIANCE IN THIS REGARD IS ALSO PLACED ON THE DECISION OF THE HONBLE ITAT IN THE CASE OF CHEMINVEST LTD., VS. ITO [2009] 121 LTD 318 (DELHI) (SB). HENCE THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT, 1961. LATER THE AO COMPLETED THE ASSESSMENT U/S.1 43(3) R.W.S.147 ITA NO.2046/MDS/2015 6 ON 01.12.2011 WHEREIN HE MADE AN ADDITION NOT ONLY WITH REGARD TO SEC.14A DISALLOWANCE, BUT ALSO DISALLOWED DEDUCTION U/S.80-IB OF THE ACT OF RS.3,75,58,838/-. DURING THE COURSE OF REASS ESSMENT, IT WAS FOUND THAT THE CLAIM OF ASSESSEE IS NO SUSTAINABLE U/S.80-IB OF THE ACT AND THE SAME WAS WITHDRAWN. NOW, THE CONTENTION OF THE ASSESSEES COUNSEL WAS THAT THE RE-OPENING WAS BAD IN LAW AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS TRULY AND FULLY FOR THE PURPOSE OF ASSESSMENT. IN OUR OP INION THIS ARGUMENT CANNOT HAVE ANY MERIT. 8. IT IS A SETTLED LAW THAT ON THE BASIS OF MATER IAL, PRIMA FACIE, AVAILABLE BEFORE THE ASSESSING OFFICER, OPINED THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT CAN BE FOR MED. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD ME AN CAUSE OR JUSTIFICATION. IN CASE THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSME NT , ACTION U/S 148 CAN BE TAKEN. BUT OBVIOUSLY, THERE SHOULD BE RE LEVANT MATERIAL ON WHICH A REASONABLE MAN COULD HAVE FORMED A REQUISIT E BELIEF. WHETHER THIS MATERIAL(S) WOULD CONCLUSIVELY PROVE T HE ESCAPEMENT OF INCOME IS NOT THE CONCERN AT THAT PARTICULAR STAGE. SO WHAT IS REQUIRED ITA NO.2046/MDS/2015 7 IS THE SUBJECTIVE SATISFACTION OF THE ASSESSING OFF ICER BASED ON OBJECTIVE MATERIAL EVIDENCE. IN THE GIVEN CASE, ASS ESSMENT WAS COMPLETED ON 21.12.2006 U/S.143(3) R.W.SEC.147 OF T HE ACT. THE REASON WAS RECORDED AS DISCUSSED ABOVE. THE ARGUMEN T OF THE LD.AR IS THAT U/S 147 IN CASE THE ASSESSMENT ORDER IS COM PLETED U/S 143(3), AS HAS BEEN DONE IN THIS CASE, NO ACTION COULD BE T AKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR UNLESS THE ASSESSEE HAS DISCLOSED FULLY AND TRULY A LL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THAT ASSESSMENT YE AR, INTER ALIA. AS SEEN FROM THE REASONS RECORDED WHICH GIVES A CLE AR PICTURE THAT THE ASSESSING OFFICER HAS GOT MATERIAL EVIDENCE TO FORM HIS OPINION FOR TAKING RECOURSE TO SECTION 147 R.W.S 148 OF THE ACT. THERE CANNOT BE TWO OPINIONS. THE POINT OF TIME WHEN THE REASONS ARE RECORDED AFTER FORMING OPINION OF ESCAPEMENT OF INCOME IS ONLY RELEVANT. HENCE, THIS PLEA OF THE LD.AR IS NOT TENABLE IN THE EYES OF LAW. IT IS TRUE THAT U/S.147, THE ASSESSING OFFICER CAN EITHER ASSESS OR RE- ASSESS BUT FOR TAKING ACTION THEREUNDER, HE HAS TO RECORD REASONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT . I T IS ALSO MANDATED BY SECTION 148(2) TO RECORD REASONS IN WRI TING. THE ITA NO.2046/MDS/2015 8 REASSESSMENT PROCEEDINGS U/S 147 ARE FURTHER SUBJEC T TO SECTIONS 148,149,150,151,152 AND 153. BUT IN THE PRESENT CAS E, WE ARE REQUIRED TO DECIDE THE LIMITED ISSUE REGARDING THE VALIDITY OF PROCEEDINGS UNDERTAKEN AFTER FOUR YEARS OF THE ASSE SSMENT YEAR IN QUESTION. THE ASSESSING OFFICER IS REQUIRED TO SEE IF THE CONDITIONS LAID IN EXPLANATION 2(C) BECAUSE IN THIS CASE THE A SSESSMENT WAS COMPLETED U/S 143(3) ARE SATISFIED OR NOT. IN CASE, (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR(III) SUCH INCOME HAS BEEN MADE THE SUBJECTIVE OF EXCESS RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED, THE ASSESSING OFFICER WOULD HAVE VAL ID COGNIZANCE U/S 147 OF THE ACT. THE REASONS RECORDED BY THE ASS ESSING OFFICER CLEARLY SPEAK FOR THE UNDER ASSESSMENT OF TAX HENCE , THE CONDITIONS LAID ABOVE STAND FULFILLED IN SO FAR AS RE-ASSESSME NT PROCEEDINGS ARE CONCERNED. IN SO FAR AS THE REASONS RECORDED, EXTRA CTED IN THE ABOVE PORTION OF THIS ORDER, WE ARE SATISFIED THAT THE AS SESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSM ENT. THIS FACT CONFERS JURISDICTION ON HIM TO REOPEN THE ASSESSMEN T. THE POWER TO ITA NO.2046/MDS/2015 9 RE-ASSESS POST 1ST APRIL, 1989 ARE MUCH WIDER THAN THESE USED TO BE BEFORE. BUT STILL THE SCHEMATIC INTERPRETATION OF T HE WORDS REASON TO BELIEVE FAILING WHICH SECTION 147 WOULD GIVE ARBIT RARILY POWERS TO THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE B ASIS OF MERE CHANGE OF OPINION, WHICH CANNOT BE, PER SE A REASON TO REOPEN THE CASE. THE ACT HAS NOT GIVEN POWER TO THE ASSESSING OFFICER TO REVIEW BUT HAS ONLY GIVEN POWER TO RE-ASSESS. THERE IS A C ONCEPTUAL DIFFERENCE BETWEEN THE TWO ASPECTS AS THE ASSESSING OFFICER HAS NO POWER AT ALL TO REVIEW THE ASSESSMENT. THE REASSESS MENT, AS STATED ABOVE, HAS TO BE BASED ON FULFILLMENT OF CERTAIN PR E-CONDITIONS BUT THE CONCEPT CHANGE OF OPINION HAS TO BE TAKEN INTO CO NSIDERATION OTHERWISE IT MAY GIVE UNBRIDLED POWER TO AN ASSESSI NG OFFICER TO REOPEN ANY AND EVERY ASSESSMENT ORDER WHICH WOULD S IMPLY AMOUNT TO A REVIEW. THE CONCEPT CHANGE OF OPINION IS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICER. SO, NOW ONLY WHEN THE ASSESSING OFFICER HAS A TANGIBLE MATERIAL TO BASE HIS CONCLUSION THAT THERE IS AN ESCAPEMENT OF INCOME FR OM ASSESSMENT AND THE REASONS RECORDED HAVE A LINK WITH THE FORMA TION OF HIS BELIEF, HE HAS THE POWER U/S 147 OF THE ACT. ITA NO.2046/MDS/2015 10 9. NOW THE MOST MATERIAL PART WHICH WAS ARGUED BY THE LD.AR IS REGARDING THE TIME LAG WHICH IS PROVIDED IN FIRST P ROVISO TO SECTION 147 WHICH STATES THAT WHERE AN ASSESSMENT U/S SUB-SECTI ON(3) OF SECTION 143 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, WHICH IS 2004- 05, IN THIS CASE, NO ACTION SHALL BE TAKEN U/S 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY THE REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. THERE ARE TWO OTHER CONDITIONS WHICH ARE NOT RELEVANT FOR DECIDING THE LEGAL ISSUE UNDER APPEAL. WE HAVE TO SEE AS TO WHAT FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS SIGNIFY. THE EXPRESSION F AILURE TO DISCLOSE MATERIAL FACTS HAS BEEN EXPLAINED IN THE TAXMANS DIRECT TAXES MANUAL VOLUME 3. IT IS TRUE THAT EVERY DISCLOSURE IS NOT AND CANNOT BE TREATED TO BE A TRUE AND FULL DISCLOSURE. A DISC LOSURE CAN BE EVEN FALSE OR TRUE. IT MAY BE A FULL DISCLOSURE OR IT MA Y NOT BE A FULL ONE. A PART DISCLOSURE MANY A TIMES MAY BE MISLEADING ONE. WHAT IS REQUIRED UNDER THE LAW IS A FULL AND TRUE DISCLOSUR E OF ALL MATERIAL FACTS ITA NO.2046/MDS/2015 11 NECESSARY FOR MAKING ASSESSMENT FOR THAT YEAR. THI S LAW WAS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF SR I KRISHNA PVT. LTD ETC VS ITO & OTHERS, 221 ITR 538. THE WORDS OM ISSION OR FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ASSESSMENT FOR THAT YEAR POSTULATES A FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESS MENT. WHAT FACTS ARE MATERIAL AND NECESSARY FOR ASSESSMENT WILL DIFF ER FROM CASE TO CASE. THE MATERIAL SHOULD NOT ONLY BE FULL BUT ALSO BE TRUE. IF SOME MATERIAL FOUND IN THE EVIDENCE PRODUCED BEFORE THE ASSESSING OFFICER WHICH THE ASSESSING OFFICER COULD HAVE UNCOVERED BU T DID NOT, THEN IT IS THE DUTY OF THE ASSESSEE TO BRING IT TO THE NOTI CE OF THE ASSESSING AUTHORITY. THIS OMISSION OR FAILURE MAY BE EITHER D ELIBERATE, OR EVEN INADVERTENT, THAT IS IMMATERIAL, BUT IN CASE THERE IS OMISSION TO DISCLOSE THE MATERIAL FACTS THEN SUBJECT TO THE OTH ER CONDITIONS JURISDICTION TO REOPEN IS ATTRACTED. 10. IN THE PRESENT CASE, THERE IS AN ORDER OF SPE CIAL BENCH IN THE CASE OF CHEMINVEST LTD.V. ITO NEW DELHI REPORTED IN [2009] 121 ITD 318 (DELHI) ON THE BASIS OF WHICH DISALLOWANCE U/S. 14A(1) OF THE ACT ITA NO.2046/MDS/2015 12 IS TO BE MADE. NEITHER OF THE PARTIES AWARE OF THIS DECISION AND THERE WAS NO DISCUSSION OF WHATSOEVER IN THE ORIGINAL ASS ESSMENT ORDER ON THIS ISSUE. AS SUCH THE AO REOPENED THE CONCLUDED O RIGINAL ASSESSMENT TO DISALLOW THE EXPENDITURE IN TERMS OF SECTION 14A OF THE ACT. FURTHER, EXPLANATION 1 TO SECTION 147 OF THE INCOME TAX ACT WHICH READS AS UNDER: PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUN TS BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENC E COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY TH E ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. IT IS POSSIBLE THAT WITH DUE DILIGENCE THE ASSESSIN G OFFICER WOULD HAVE ASCERTAINED THIS FACT AT THE TIME OF ORIGINAL ASSES SMENT ALSO, BUT IN VIEW OF THE EXPLANATION (1) IT DOES NOT MEAN THAT T HERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE. HENCE, REOPENING U/S.1 47 IS HELD TO BE VALID. THE ASSESSEE HAS TRIED TO TAKE SHELTER UNDER THE EXCEPTION PROVIDED BY THE ABOVE STATED PROVISO WHERE AN ASSES SMENT UNDER SUB-SECTION (3) OF SECTION 143 HAS BEEN COMPLETED; NO ACTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESS MENT YEAR CAN BE ITA NO.2046/MDS/2015 13 TAKEN. BUT AS STATED ABOVE, WHEN THE ASSESSEE HAS N OT DISCLOSED FULLY AND TRULY THE FACTS NECESSARY FOR THE ASSESSM ENT, THIS PROVISO WILL NOT COME TO ITS RESCUE. SAME IS APPLICABLE TO OTHE R REASONS RECORDS FOR REOPENING OF ASSESSMENT. CONSEQUENTLY, WE HOLD THAT THE ENTIRE REASSESSMENT PROCEEDING IN THIS CASE IS VALID AND T HEREFORE, THE ACTION OF THE ASSESSING OFFICER IS UPHELD. THE ASSE SSEE FAILS ON THIS LEGAL ISSUE. BEING SO, THERE WAS NO INFORMATION RE GARDING EXEMPT INCOME THAT ITSELF IS SUFFICIENT TO HOLD THAT THE A SSESSEE HAS DISCLOSED ALL THE MATERIAL FACT NECESSARY FOR THE PURPOSE OF ASSESSMENT. THE ASSESSEE MUST HAVE BROUGHT TO THE NOTICE OF THE AO THE DECISION OF THE SPECIAL BENCH IN THE CASE OF CHEMINVEST LTD.V. ITO NEW DELHI (SUPRA). THE FAILURE OF THE ASSESSEE TO CONSIDER T HE APPLICATION OF THIS SPECIAL BENCH DECISION IS ALSO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL THE MATERIAL FACT FULLY AND TRULY FOR THE PURPOSE OF ASSESSMENT . AS SUCH REOPENING IS VALID. FURTHER, THE ASSESSEE HAS TAKEN A PLEA THAT IN VIEW OF THE JUDGEMENT OF BOMBA Y HIGH COURT IN THE CASE CIT VS. JET AIRWAYS (I) LTD., CITED SUPRA, THE AO CANNOT TRAVEL BEYOND THE REASONS RECORDED. IN OUR OPINIO N, THIS ARGUMENT HOLDS NO WATER. IN THAT CASE HONBLE BOMBAY HIGH C OURT HELD THAT ITA NO.2046/MDS/2015 14 AO MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE WHICH COMES TO HIS NOTICE. SUBSEQUENTLY, IN THE COURSE O F THE PROCEEDINGS, THOUGH THE REASONS FOR SUCH ISSUE WERE NOT INCLUDED IN THE NOTICE, HOWEVER EVEN IF ISSUING OF NOTICE U/S.148, THE AO A CCEPTED THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOM E WHICH HE HAS INITIALLY CONFIRMED THE REASONS TO BELIEVE, HAD ESC APED ASSESSMENT, AS A MATTER OF FACT NOT ESCAPED ASSESSMENT, DOES NO T OPEN TO HIM INDEPENDENTLY TO ASSESS SOME OTHER INCOME. HOWEVER, IN THE PRESENT CASE, IT IS NOT THE CASE OF ASSESSEE THAT THE AO WA S NOT MADE ANY ADDITION BY INVOKING THE PROVISIONS OF THE SECTION 14A OF THE ACT. BEING SO, THE CONTENTION OF THE ASSESSEE WAS THAT T HERE IS NO ADDITION FOR WHICH THE ASSESSMENT WAS REOPENED, IS NOT CORRE CT. THERE IS AN ADDITION BY THE AO ON THE REASONS RECORDED THAT IS BY INVOKING THE PROVISIONS OF THE SECTION 14A OF THE ACT AND BEING SO; THE AO CAN TRAVEL BEYOND HE REASONS RECORDED FOR MAKING THE AD DITION AS DISALLOWANCE IN RE-OPENING THE ASSESSMENT ALSO. AC CORDINGLY, THIS GROUND OF THE ASSESSEE IS REJECTED. ITA NO.2046/MDS/2015 15 11. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD TO DISALLOWANCE U/S.80IB OF THE ACT IN RESPECT OF PALAVARAM UNIT. 12. AFTER HEARING BOTH THE PARTIES, THIS ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE I N ITA NO.1791 TO 1796/2011 DATED 31.10.2012 FOR THE ASSESSMENT YEARS 2002-03 TO 2007-08. THE RELEVANT PORTION OF THE TRIBUNAL ORDER IS REPRODUCED BELOW FOR READY REFERENCE:- 15. WE HAVE CONSIDERED THE ISSUE AT LENGTH AND ALS O PERUSED THE RELEVANT FINDINGS AS WELL AS CASE LAWS CITED. ADMI TTEDLY, THE ASSESSEE IS A MANUFACTURE OF RUBBER CONTRACEPTIVES,(CONDOMS), WHO HAS CLAIMED DEDUCTION UNDER SECTION 80-IB REGARDING ITS UNIT AT PALLAVAR AM, NEAR CHENNAI. THE A.O. AS WELL AS THE CIT(A) HAVE DECLINED THE CLAIM ON TH E GROUND THE PRODUCT FALLS UNDER ENTRIES 27 & 28 OF THE ELEVENTH SCHEDULE OF THE ACT AND THE UNIT IS LOCATED IN A CANTONMENT AREA. THE CIT(A) HAS NOT SPECIFICALLY DECIDED THE LATTER OBJECTION AND UPHELD THE A.O.S FIRST CONCL USION REGARDING ELEVENTH SCHEDULE POST OF YEARS APPLICABILITY OF THE FACTS O F THE CASE. COMING TO THE STATUTORY PROVISION ITSELF, IT IS CLEAR THAT SEC.80 -IB OF THE ACT PROVIDES DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM CERTAIN INDUST RIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS. BUT THE S AME IS NOT WITHOUT ANY CONDITION. THE SUB-SECTION(2) OF SEC.80-IB IMPOSE CERTAIN CONDITIONS WHICH HAVE TO BE FULFILLED. THE SAME ARE REPRODUCED AS UNDER:- ITA NO.2046/MDS/2015 16 SECTION 80-IB- DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM CERTAIN INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE D EVELOPMENT UNDERTAKING. - (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INC LUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB- SECTIONS (3) TO (11) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVIS IONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE, A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO SUCH P ERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THIS SEC TION. (2) THIS SECTION APPLIES TO ANY INDUSTRIAL UNDERTA KING WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY :- (I) IT IS NOT FORME D BY SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE : PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RES PECT OF AN INDUSTRIAL UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE- ESTABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BU SINESS OF ANY SUCH INDUSTRIAL UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN THAT SECTION; (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSI NESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE; (III) IT MANUFACTURES OR PRODUCES ANY ARTICLE OR TH ING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE LIST IN THE ELEVENTH SCHEDUL E, OR OPERATES ONE OR MORE COLD STORAGE PLANT OR PLANTS, IN ANY PART OF INDIA : PROVIDED THAT THE CONDITION IN THIS CLAUSE SHALL, I N RELATION TO A SMALL SCALE INDUSTRIAL UNDERTAKING OR AN INDUSTRIAL UNDERTAKING REFERRED TO IN SUB-SECTION ITA NO.2046/MDS/2015 17 (4) SHALL APPLY AS IF THE WORDS 'NOT BEING ANY ARTI CLE OR THING SPECIFIED IN THE LIST IN THE ELEVENTH SCHEDULE' HAD BEEN OMITTED. EXPLANATION 1 : FOR THE PURPOSES OF CLAUSE (II), AN Y MACHINERY OR PLANT WHICH WAS USED OUTSIDE INDIA BY ANY PERSON OTHER THAN THE ASSESSEE SHALL NOT BE REGARDED AS MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE, IF THE FOLLOWING CONDITIONS ARE FULFILLED, NAMELY :- (A) S UCH MACHINERY OR PLANT WAS NOT, AT ANY TIME PREVIOUS TO THE DATE OF THE INSTAL LATION BY THE ASSESSEE, USED IN INDIA; (B) SUCH MACHINERY OR PLANT IS IMPORTED INTO INDIA FROM ANY COUNTRY OUTSIDE INDIA; AND (C) NO DEDUCTION ON ACCOUNT OF DEPRECIATION IN RESP ECT OF SUCH MACHINERY OR PLANT HAS BEEN ALLOWED OR IS ALLOWABLE UNDER THE PR OVISIONS OF THIS ACT IN COMPUTING THE TOTAL INCOME OF ANY PERSON FOR ANY PE RIOD PRIOR TO THE DATE OF THE INSTALLATION OF THE MACHINERY OR PLANT BY THE A SSESSEE. EXPLANATION 2 : WHERE IN THE CASE OF AN INDUSTRIAL UNDERTAKING, ANY MACHINERY OR PLANT OR ANY PART THEREOF PREVIOUSLY U SED FOR ANY PURPOSE IS TRANSFERRED TO A NEW BUSINESS AND THE TOTAL VALUE O F THE MACHINERY OR PLANT OR PART SO TRANSFERRED DOES NOT EXCEED TWENTY PER CENT OF THE TOTAL VALUE OF THE MACHINERY OR PLANT USED IN THE BUSINESS, THEN, FOR THE PURPOSES OF CLAUSE (II) OF THIS SUB-SECTION, THE CONDITION SPECIFIED THEREI N SHALL BE DEEMED TO HAVE BEEN COMPLIED WITH; (IV) IN A CASE WHERE THE INDUSTRIAL UNDERTAKING MAN UFACTURES OR PRODUCES ARTICLES OR THINGS, THE UNDERTAKING EMPLOYS TEN OR MORE WORKERS IN A MANUFACTURING PROCESS CARRIED ON WITH THE AID OF PO WER, OR EMPLOYS TWENTY OR ITA NO.2046/MDS/2015 18 MORE WORKERS IN A MANUFACTURING PROCESS CARRIED ON WITHOUT THE AID OF POWER. SINCE THERE IS FURTHER STIPULATION IN THE ABOVE PR OVISION THAT THE ARTICLE OR THING AS MANUFACTURED OR PRODUCED BY THE CONCERNED ASSESSEE SHOULD NOT BE COVERED BY THE ELEVENTH SCHEDULE OF THE ACT, WE ALS O DEEM IT APPROPRIATE TO REPRODUCE HEREIN BELOW THE NECESSARY ITEMS AS FOLLO WS: ELEVENTH SCHEDULE ITEM NO.27: CROWN CORKS OR OTHER FITTINGS OF CORK, RUBBER, PO LYETHYLENE OR ANY OTHER MATERIAL. ITEM NO.28: PILFER PROOF CAPS FOR PACKAGING OR OTHER FITTINGS O F CORK, RUBBER, POLYETHYLENE OR ANY OTHER MATERIAL. IT IS THE CASE OF THE ASSESSEE THAT ITS PRODUCT MAN UFACTURED, I.E. RUBBER CONTRACEPTIVES OR CONDOMS, ARE NOT COVERED BY ARTI CLES 27 & 28 WHEREAS THE REVENUES STAND IS THAT THE SAME IS HIT BY THE SAI D SCHEDULE. NOW, THE MOOT QUESTION BEFORE US AS TO WHETHER A CONDOM IS COVERE D BY THE ELEVENTH SCHEDULE ENTRIES NOS.27 & 28 OR NOT? AFTER PERUSING THE STA TUTORY PROVISIONS, WE ARE OF THE OPINION THAT ENTRY NO.27 PERTAINS TO CROWN CORKS OR OTHER FITTINGS OF CORK, RUBBER, POLYETHYLENE OR ANY OTHER MATERIAL. IN OTHER WORDS, THE SAME COVERS THE CASE OF RUBBER FITTINGS WHEREAS ENTRY-28 COVERS CASES OF PI LFER PROOF CAPS FOR PACKAGING OR OTHER FITTINGS OF RUBBER. THE TWO ENTRIES ABOV E CITED I.E. ITEM NOS. 27 & 28 ENVISAGE DIFFERENT CONTEXTUAL REFERENCES I.E. CROWN CORKS AND OTHER FITTINGS OF CORK AND RUBBER AND PILFER PROOF CAPS. IF WE ANALY ZE THE USAGE OF A CONDOM, WE ITA NO.2046/MDS/2015 19 ARE CONSTRAINED TO HOLD THAT IT IS A SHEATH OF RUB BER FITTING, MADE TO FIT OVER SEXUAL ORGAN FOR PREVENTION OF SEXUAL TRANSMITTED DISEASES AND UNWANTED PREGNANCIES. SINCE THE STATUTE RESTRICTS THE SCOPE OF THE DEDUCT ION PROVISION, THAT TOO UNEQUIVOCALLY THAT OTHER FITTINGS OF RUBBER ARE I NCLUDED IN THE LIST OF ARTICLES OR THINGS MANUFACTURED, IN THE ABSENCE OF ANY OTHER EX PLANATION OR SO, WE SEE NO REASON TO INTERFERE IN THE WELL REASONED FINDINGS O F CIT(A). WE REITERATE THAT WHETHER OR NOT A RUBBER PRODUCT IS AN ARTICLE OR T HING COVERED BY ELEVENTH SCHEDULE DEPENDS ON THE NATURE AND CHARACTERISTIC O F THE PRODUCT MANUFACTURED AND NOT ON THE CASE LAWS SETTLING LEGAL PRINCIPLES AS THERE CANNOT BE ANY STRAIGHT JACKET FORMULA DEFINING ITS PURVIEW. SO FAR AS TO THE CASE LAWS CITED BY THE A.R IS CONCERNED, IN OUR OPINION, THE PRODUCTS INVOLVED IN THE SAME WERE ALTOGETHER DIFFERENT I.E. RUBBER STOPPERS, CIGARETTE FILTERS, RUBBER COMPOUNDS FOR UTILIZATION IN RUBBER INDUSTRIES. THEREFORE, THE SAME ARE NOT REL EVANT QUA ADJUDICATION OF THE INSTANT ISSUE. WE ALSO NOTICE THAT IN M/S.MRF LTD C ASE (SUPRA), IT HAD BEEN OBSERVED AS UNDER:- 22. THE LAST ISSUE OF THIS APPEAL IS REGARDING WIT HDRAWAL OF 80IA BENEFITS. THE ASSESSEE HAS CLAIMED DEDUCTION OF `15,14,97,778/- UNDER SECTION 80IA OF THE ACT. INITIALLY, THIS WAS ALLOWED BUT IN RE-ASSESSM ENT PROCEEDINGS THIS DEDUCTION WAS WITHDRAWN BECAUSE THE COMPANYS PRODUCTS WERE N OT FOUND TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA AS IT MANUFACTURES ART ICLES SPECIFIED IN ELEVENTH SCHEDULE OF THE ACT. ITEM 27 OF ELEVENTH SCHEDULES APPENDED TO THE INCOME TAX ACT, 1961 READS AS UNDER: ITA NO.2046/MDS/2015 20 CROWN CORKS OR OTHER FITTINGS OF CORK, RUBBER, POLY ETHYLENE OR ANY OTHER MATERIAL. 23. A BARE READING OF THIS SCHEDULE MAKES IT AMPL Y CLEAR THAT MANUFACTURE OF TYRES OF RUBBER WHICH FALLS UNDER ITEM 27 WHICH EXCLUDE THE ITEM FROM THE BENEFIT OF SECTION 80IA. IN THIS SCHEDULE, CROWN C ORKS, OR OTHER FITTINGS OF CORK, RUBBER, POLYETHYLENE OR ANY OTHER MATERIAL HA S BEEN MENTIONED CLEARLY. THE USE OF THE WORDS CROWN CORKS MAKES IT ABUNDAN TLY EVIDENT THAT OTHER FITTINGS OF CORK OR RUBBER ARE ALSO HIT BY THIS PRO VISION AND THE ARGUMENT OF THE LD. A.R THAT THE RUBBER FITTINGS WILL TAKE COLO UR FROM CROWN CORKS IS NOT SUSTAINABLE IN THE EYES OF LAW. THE MEANING OF THI S ITEM NO.27 IS VERY CLEAR AND THE STATUTE HAS INTENDED TO DEBAR MANUFACTURE O F RUBBER FITTINGS FROM SUCH BENEFIT. THE USE OF WORD OR IN BETWEEN C ROWN CORKS OR OTHER FITTINGS OF RUBBER SIMPLY EXPLICITLY SAY SO. THERE IS NO QU ESTION OF FURTHER INTERPRETATION REGARDING THE SAME. THERE IS NO DIS PUTE BETWEEN THE PARTIES REGARDING THE FACT THAT TYRE IS A RUBBER FITTING. THE MATERIAL USED FOR TYPE IS DEFINITELY RUBBER AS PER ITEM NO.27 OF ELEVENTH SC HEDULE WHICH PRESCRIBES THE LIST OF ARTICLES OR THINGS NOT ELIGIBLE FOR DED UCTION UNDER SECTION 80IA, DISENTITLES THE ASSESSEE FROM THIS CLAIM. THE DECI SIONS RELIED ON BY THE LD. A.R ARE ENTIRELY ON DIFFERENT FACTS AND THEY ARE NO T AT ALL RELEVANT. THEREFORE, THIS APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 200 2-03 STANDS DISMISSED. TAKING CUE FROM THE SAME, AND IN VIEW OF OUR ABOVE ANALYSIS OF THE FACTS OF THE CASE, WE HOLD THAT THE ASSESSEES PRODUCE MANUFACTU RED IS AN ITEM COVERED BY ITEM NOS.27& 28 OF ELEVENTH SCHEDULE OF THE ACT B EING A RUBBER FITTING. ACCORDINGLY, WE HOLD THAT THE CIT(A) HAS RIGHTLY UP HELD THE REJECTION OF ASSESSEES CLAIM OF DEDUCTION/S 80IB OF THE ACT. SO , THE ISSUE IS DECIDED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. ITA NO.2046/MDS/2015 21 RESPECTFULLY FOLLOWING THE ABOVE RATIO LAID DOWN BY THIS TRIBUNAL, WE ARE INCLINED TO HOLD THAT THE ASSESSEE IS NOT ENTIT LED FOR DEDUCTION U/S.80-IB OF THE ACT IN RESPECT OF ITS UNIT AT PALL AVARAM UNIT WHICH IS MANUFACTURING RUBBER CONTRACEPTIVES. 13. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON WEDNESDAY, THE 10 TH OF FEBRUARY,2016 AT CHENNAI. SD/- SD/- ( . ! ' # ) (G.PAVAN KUMAR) ( ( ) ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 10 TH FEBRUARY,2016 . K S SUNDARAM. 3 * ,$.45 65'. /COPY TO: 1. () /APPELLANT 2. ,-() /RESPONDENT 3. ' 7. () /CIT(A) 4. ' 7. /CIT 5. 5!89 ,$.$ /DR 6. 9:& ; /GF